Manufacturing activity contracted for an 11th consecutive month in January, with the seasonally adjusted Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) recording a level of 40.2, down from 44.3 one month ago. (Readings below 50 indicate a contraction in activity with the distance from 50 indicative of the strength of the decrease).

The contraction in manufacturing new orders worsened, reflecting weak global demand and a softening Australian economy. The new orders sub-index fell 6.3 points to 39.4 in January.

The manufacturing production sub-index remained firmly in the red, at 40.4 in January, down by 2.1 points from December.

Only the wood & paper products sub-sector expanded in January, while the contraction in the other sub-sectors, except petroleum, coal, chemical and rubber products, eased.

Survey respondents remained cautious about the outlook. They cited a range of inhibitors including: soft demand; weak confidence; and the strong Australian dollar.

Wages and input costs continued to rise in January, while the decline in selling prices persisted, indicating that the profits for manufacturers remain under pressure.